Yen climbs on safety demand as Cyprus banks reopen

The yen rose versus a majority of its 16 most-traded counterparts as Cyprus’s banks reopened for the first time since striking a bailout deal that forced losses on some depositors, spurring demand for the safest assets.

Japan’s currency strengthened as the Bank of Japan reiterated its policy-easing options, damping speculation for additional novel measures to boost the economy. The euro rose from a four-month low against the dollar. Mexico’s peso has been the best performer against the dollar among its 16 major peers this month and this quarter.

“The yen is stronger partly because of the safety principle,” said Steven Barrow, head of Group of 10 research at Standard Bank Plc in London. “The markets may be sensitive to the news around the reopening of banks in Cyprus. The market is well set up for something reasonably aggressive from the BOJ so the downside risks for the yen against the dollar are limited.”

The yen gained 0.4% to 94.09 per dollar at 10:21 a.m. New York time. Japan’s currency lost 0.1% to 120.79 per euro. The 17-nation euro rose 0.4% to $1.2835. It touched $1.2751 yesterday, the least since Nov. 21.

Peso Strength

Mexico’s peso has gained 3.5% to the greenback in the past month, while South Korea’s won has declined 2.7%. This quarter, the Mexican currency has rallied 4.1% and South Africa’s rand has depreciated 8%.

The rand today gained the most in two weeks as the nation’s trade deficit narrowed in February from a record in the previous month. South Africa’s currency rose 0.5% to 9.2127 per dollar.

The Australian dollar fell for a second day against Japan’s currency as Italy’s inability to form a government and Cyprus’s bailout damped demand for riskier assets. The so-called Aussie fell 0.7% to 97.98 yen.

The European Central Bank is scheduled to make its next policy announcement on April 4. The central bank has held its benchmark interest-rate at 0.75% since July.

The Central Bank of Cyprus’s capital controls will include a 300-euro ($384) daily limit on withdrawals and restrictions on transfers to accounts outside the country. Banks opened at midday. They will close at 6 p.m. local time, Yiangos Dimitriou, head of the central bank’s audit department, said yesterday in comments broadcast on state-run CyBC television.